Mubadala battles to salvage investment in insurance start-up Wefox

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Abu Dhabi’s Mubadala is embroiled in a bitter board fight over the future of Wefox, the once high-flying European insurance start-up, as the $300bn sovereign wealth fund attempts to salvage an investment that has soured.

Mubadala is now circulating materials to fellow investors laying out potential options for the Berlin-based company that include a deal with a competitor which would value some core assets at €550mn. Wefox achieved a valuation of $4.5bn just two years ago.

Founded in 2015, Wefox was among the most richly valued European start-ups of the past decade as it rapidly expanded its platform connecting insurers with customers via a network of agents.

In 2022, the company cemented that status with a new investment round led by Mubadala which valued the group at $4.5bn.

The company has also raised funds from the likes of UK-listed investor Chrysalis and Prince Max von und zu Liechtenstein’s LGT Group.

But in the couple of years since Mubadala’s latest investment, Wefox has faced difficulties. Its situation mirrors that of a wave of start-ups which were fuelled by cheap funding but now have to contend with tight financial conditions and the pressure to generate profits.

The company has burnt through cash and faced steep funding requirements at its insurance carrier unit, while rival “insurtech” groups have seen their valuations plummet in public markets.

The situation reached a critical point this year. Wefox founder Julian Teicke stepped down as chief executive in March to be replaced by the group’s chair, industry veteran Mark Hartigan.

Against that backdrop, Wefox has been in talks to sell key parts of the company to UK insurance group Ardonagh, which is backed by the Abu Dhabi Investment Authority, people familiar with the company said.

Ardonagh’s all-share proposal for some of Wefox’s non-tech assets would carry a price of around €350mn up front and another €200mn in earn-out payments contingent on hitting certain milestones, the people said.

Mubadala stands to gain more from a sale of Wefox than other shareholders due to a special provision included in its investment.

The wealth fund negotiated a so-called two-times liquidity preference, meaning it would have a right to receive double its investment in any sale before other shareholders were eligible for proceeds.

Mubadala, whose openness to a sale was reported by Bloomberg on Thursday, is just one of the company’s investors and is not leading any process, one of the people cautioned.

Some Wefox investors who oppose a sale are putting together their own rescue financing deal. They believe the company can chart a path to profit and is more valuable than the Ardonagh proposal.

In May, Chrysalis issued a statement that “a plan has been put in place to simplify Wefox’s business model to drive the company towards profitability”, adding that it had contributed €3mn out of €20mn in new funds raised in recent weeks.

Wefox, Mubadala and Ardonagh declined to comment.

Additional reporting by Ian Smith